Microcredits. A Neo-Gramscian Critique by the Example of Microcredits in Bangladesh

Bachelor Thesis, 2016

35 Pages, Grade: 1,7



1. Introduction

2. Microcredits - A Definition

3. Bangladesh, the Centre of Microcredits
3.1 Bangladesh’s Economic Environment
3.2 The Role of NGOs and Microfinance in Bangladesh

4. The Fundamentals of Neo-Gramscianism by Robert W. Cox
4.1 The Basic Ideas of Antonio Gramsci
4.2 Further Development by Robert W. Cox
4.3 The Process of Trasformiso
4.4 NGOs as Transnational Communities
4.5 Assimilation of Third World Protagonists

5. Microcredits’ Goal of Women Empowerment
5.1 Empowering Women Through Entrepreneurship
5.2 Household Control
5.3 Focus on Income-Generating Activities
5.3.1 Microcredits’ High Interest Rates
5.3.2 Subsidization of Microcredits as Possible Solution
5.4 The Group Lending Factor

6. Microcredits - Suitable to Reach the Poorest?
6.1 Replication of Findings
6.2 Waterfall Strategies to Overcome Micro Debt

7. Microcredits’ Neoliberal Environment
7.1 In Pursuit of the Hegemonic Policy
7.1.1 Multinationals’ Advantage of Investing in Microcredit Programmes ...
7.1.2 NGOs' Dependence on the International Capital Market
7.1.3 Third World Countries’ Lack of Participation
7.2 Microcredits’ Failure to Engage in Social Mobilization
7.2.1 NGOs’ Counter-Hegemonic Potential
7.2.2 Better Performance of Social Mobilization NGOs
7.2.3 The Gender and Food Caravan

8. Conclusion
8.1 The Neo-Gramscian Verdict
8.2 Strengths and Weaknesses of Neo-Gramscianism


1. Introduction

Giving credence to Muhammad Yunus, microcredits can be the panacea to “‘put poverty to the museum‘“. (Haryanti 2010: 2) The native Bangladeshi and founder of Grameen bank, the biggest microfinance institute (MFI) in the world, is regarded by the advocates of microcredits as the symbol for their success. In 2006 he won the Nobel Peace Prize for “[…] pioneering efforts to provide financial services to the poorest of the poor.“ (Kota, June 2006)

Honouring the father of microfinance has even increased the promising reporting by the media on mostly individual success stories. The apparently positive and widely cited effects of microcredits are job creation and raising incomes in the poorest communities, helping to empower especially women, and generally setting off a “bottom up” social and economic development process. (Bateman 2010: 1) However, critical voices fault that the adoption of the microfinance approach by many NGOs led to a shift away from their original social mission, sacrificing it to commercialization. (Karim 2011: 17)

By the example of Bangladesh, the “centre of microfinance”, this paper aims to provide a Neo-Gramscian critique of microcredits as an instrument of development aid. (Klas 2011: 59) Being a Marxist-oriented theory, Neo- Gramscianism would highly oppose the popular statement that microcredits can be an appropriate means to sustainably empowering the poor. The central argument of this critique will therefore be that providing the poor with microcredits and making them bankable nurtures asymmetrical power relations and neoliberalism which finally empowers the Western-dominated capitalist system, not the poor.

The structure will be the following: After defining microcredits and the mostly used group-lending method, there will be given a brief explanation of why Bangladesh is an interesting example to investigate on concerning the impacts of microcredit programs. Then, the most important aspects of Neo-Gramscianism by Robert W. Cox will be presented, justifying why it appears to be an adequate theory to criticize microcredits as a development tool. Coming to the major part, there will be introduced several empirical case studies on the impacts of microfinance. While some of them provide a critical view in a Gramscian sense, questioning the underlying values of the microfinance model and the established structures of the international system, others seem to take them for granted and consider development to be a “form of governmentality rather than a project of emancipation”. (Mitlin / Hickey / Bebbington 2007: 1699)

Referring to those studies as well as on different scientific reporting about NGOs' implementation of their microcredit agenda in Bangladesh, it will finally be concluded why microcredits do not only fail to meet the Neo- Gramscian requirements for an effective empowering instrument but even lead to a disempowerment of the poor from the theory's perspective.

Last but not least, Neo-Gramscianism itself will be criticized by demonstrating its limits of judging any development outcomes achieved through the funding of Western donors.

2. Microcredits - A Definition

Until today, there exists no homogeneous definition of microcredits. The World Bank, however, considers them to be small loans offered to poor people who lack the collaterals required by commercial banks. (Klas 2014: 201)

The focus of microcredits lies in their contribution to the foundation of microenterprises and therefore in promoting income-generating activities. (Klawatsch-Treitl 2011: 121) Hence, it is argued that the access to remunerative activities relieves the poor from onerous debts, and has especially beneficial aspects when targeted on women. (Duvendack / Palmer-Jones 2011: 1865)

The most practiced lending method is that of group formation: Credits are only provided to groups of five women who act as guarantor for each other. In this manner, access to new credit is only granted if all women of a group have repaid their debts. (Karim 2008: 109)

Since its implementation in the 1970s, the microcredit sector has grown exponentially. In 2012, there were over 3700 MFIs operating with approximately 205 million clients worldwide. In 2011, nearly 88 billion $US were spent for microcredits. This amount almost reaches the overall volume of state development aid in that year which came to 106 billion $US. (Klas 2014: 202)

3. Bangladesh, the Centre of Microcredits

3.1 Bangladesh’s Economic Environment

Albeit the country’s economy is developing dynamically with a current growth rate of 6,25%, more than 40% still live below the UN-defined poverty line of 1,25 $US a day. (BMZ July 2016) Considering that MFIs have been operating in the country since more than four decades, this is a fact that may raise doubts of microcredits’ ability to “reach the poorest of the poor”. (Zaman 2004: 11) Equally alarming is the paradoxical combination of development outcomes and poor quality of governance, reflected by high levels of corruption and democratic deficits and a civil society that does not make use of its formal rights. (Castro / Kabeer / Mahmud 2012: 2044) What is more, Bangladesh has an illiterate rate of 40% and a child mortality rate of 38% which is ten times as high as in Germany. (BMZ July 2016) In consideration of such observations it remains questionable if borrowing from an MFI really empowers people to “control their own destiny”. (Kota 2007) This, in turn, makes Bangladesh an interesting case to investigate on, especially with regard to the Neo- Gramscian critique of microcredits this paper aims to provide.

3.2 The Role of NGOs and Microfinance in Bangladesh

The South East Asian country with a population of 160 million and a surface twice as big as Bavaria holds a special role among the most vulnerable countries of the world: (BMZ July 2016) It is not only the country of birth of microcredits but also the one with the highest NGO density, nearly all of them working with microcredits. (Rahaman 2014: 54) In 1974, the Bangladesh Rural Advancement Committee (BRAC) implemented its own microcredit programme including group formation and later became the country’s largest NGO.

Just a couple of years later, Muhammad Yunus started giving small loans to women in his hometown Chittagong. The success of this experiment induced him to found the Grameen Bank in 1983, today’s biggest microfinance institute (MFI) with 2500 branches, 25000 employees and more than 8 million borrowers worldwide. (Klas 2011: 63) Another big MFI, the Association for Social Advancement (ASA), was established in 1978. (Muhammad 2014: 188) Although thousands of NGOs have started operating with microcredits since then, BRAC, Grameen and ASA are the big players in Bangladesh: All of them being originally NGOs, they control 80% of the national microfinance market. (Rahaman 2014: 53)

4. The Fundamentals of Neo-Gramscianism by Robert W. Cox

4.1 The Basic Ideas of Antonio Gramsci

As his approach aims to provide alternative interpretations to conventional models, Robert W. Cox and his Neo-Gramscian critique can be classified as belonging to the Revolutionary School of Thoughts. (Stahl 2014: 245) His ideas are mainly constructed on Antonio Gramsci’s prison notebooks written in a fascist prison between 1929 and 1935 which “always referred to Marxism as the ‘philosophy of praxis’”. (Cox 1996: 125)

However, while Marx mainly focused on economic processes, Gramsci wondered how a permanent position of power of the capitalists could be maintained in a society. He therefore introduced the term hegemony which comprises both the actual power position in terms of ownership of capital equipment and the long-term guarantee of this position. (Stahl 2014: 246)

4.2 Further Development by Robert W. Cox

While Gramsci’s concept of hegemony was still limited to the nation state level (2nd image), Cox expands its application to the international system (3rd image): As the capitalist social force cannot directly influence the international order, it has to gather different groups around its leadership, thereby forming a historical block which finally has the power to implement the hegemonic project of neo-liberalism. (ib.)

Gramsci had adopted Machiavelli’s image of power as a centaur: “half man, half beast, a necessary combination of consent and coercion”, although coercion is not required “so long as rulers recognized the hegemonic structures of civil society as the basic limits of their political action”. (Cox 1996: 126) These structures are constantly reproduced by the church, the educational system, the press - all the institutions which create in people particular modes of behaviour and values consistent with the hegemonic order. (ib.) One adequate example would be the neoliberal convictions that everyone is responsible for their own destiny. (Stahl 2014: 246)

4.3 The Process of Trasformiso

Making the subordinate class accept such beliefs can serve as a strategy of assimilating potentially dangerous ideas and thereby of obstructing the formation of class-based organized opposition to the established power. (Cox 1996: 130) This “feature of passive revolution” is what Gramsci called trasformismo. (ib.) Focusing on the international level, Cox detects that “today this notion of passive revolution is particularly apposite to industrializing Third World Countries”. (ib.: 131)

In this connection, Girei (2016: 202) emphasizes the distinction between “composite” and “molecular transformism”: Whereas “composite transformism” refers to groups such as NGOs, “molecular transformism” means the absorption of individuals that takes place when leaders of development countries get convinced that their full integration into the global economy in neo-liberal terms is necessary. (Warner 2009: 18) This process of neutralizing antagonistic interests aims at preserving capitalism while still giving some satisfaction to the subordinate groups, because their discontent could promote a questioning of the hegemony’s legitimacy. This, in turn, could lead to the creation of a counter-hegemonic block which would challenge the capitalist system, manoeuvring it into an organic crisis. (Stahl 2014: 249)

4.4 NGOs as Transnational Communities

Oriented on Marx’s requirements for a revolution from below, alternative intellectual resources have to be built within civil society, “the battleground in the undecided war between globalization from above and from below”. (Warner 2009: 10)

Now, this can be applied on the field of development politics: NGOs as civil society actors who have themselves become a transnational community would theoretically have the potential to spread counter-hegemonic ideas and “put the ideological glue of the historical bloc […] asunder”. (ib.: 19) However, the shift of many NGOs towards the provision of microcredits requires the funding of those hegemonic elites whose ideology should actually be contested. Neo-Gramscianism would therefore criticize that operating with microcredits and promoting entrepreneurship as a universal need undermines NGOs’ counter-hegemonic potential and finally promotes neo-liberalism as the hegemonic project.

4.5 Assimilation of Third World Protagonists

As already mentioned, Cox considers it to be part of the hegemonic strategy that the subordinate class gets satisfied to the extent necessary to make the established structures appear advantageous. This includes that the peripheral countries are granted a certain degree of “formal participation […] in favor of the dominant powers as in the International Monetary Fund or the World Bank”, institutions that represent the orientations favourable to the hegemonic forces. (Cox 1996: 138) By co-opting elite talents from peripheral countries into those institutions, they are “condemned to work within the structures of passive revolution”. (ib.: 139)

In this manner, “hegemony is like a pillow: it absorbs blows and sooner or later the would-be assailant will find it comfortable to rest upon”. (ib.)

One adequate example herefore is Hassan Zaman, Senior Advisor in the South Asia Region of the World Bank. The native Bangladeshi began his career by working for BRAC, one of the big NGOs providing microcredits in Bangladesh. Until recently he was Chief Economist of the Bangladesh Bank and prior to this a Lead Economist at the World Bank. (World Bank Blogs 2016) He led several investigations on microcredits’ impacts in Bangladesh on behalf of the World Bank and donor agencies like USAID, institutions that Cox supposes to “embody rules which facilitate the expansion of the hegemonic world order”. (Cox 1996: 138)

Interestingly enough, Zaman mainly refers to samples set up by other World Bank investigators. Still perceiving the international system in a NeoGramscian view, this proves the existence of an alliance of capitalists from different states who cooperate transnationally in order to convince further social classes of the neo-liberal project, thereby transforming it into a permanent hegemonic order. (Stahl 2014: 247)

5. Microcredits’ Goal of Women Empowerment

5.1 Empowering Women Through Entrepreneurship

Zaman’s case studies are consequently run through by the strong believe that providing women with microcredits leads to their empowerment. (Zaman 2004: 14f.; Zaman et al. 2000: 103f.) Regretting that women in Bangladesh are less likely to become entrepreneurs than men, he welcomes microcredits’ ability to “increase their access to independent income and [to] strengthen their decision-making role” for the purpose of higher female involvement in microenterprises. (Zaman et al. 2000: 45, 103)

The underlying beliefs of such remarks expose Zaman as part of the historical block who tries to promote the neo-liberal project: By thinking


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Microcredits. A Neo-Gramscian Critique by the Example of Microcredits in Bangladesh
University of Passau
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microcredits, neo-gramscian, critique, example, bangladesh
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Theresa Hübscher (Author), 2016, Microcredits. A Neo-Gramscian Critique by the Example of Microcredits in Bangladesh, Munich, GRIN Verlag, https://www.grin.com/document/344414


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